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Dividend reductions, the timing of dividend payments and information content

Author

Listed:
  • Balachandran, Balasingham
  • Krishnamurti, Chandrasekhar
  • Theobald, Michael
  • Vidanapathirana, Berty

Abstract

Australian companies pay dividends semi-annually with smaller “interim” payments and larger “final” payments. Interim dividends are declared and paid within a less full information environment than final dividends. We analyze the interactions between the timing of dividends and their information content, controlling for share repurchase and tax effects. Dividend reductions that are not associated with share repurchases are statistically significantly related to future abnormal earnings and provide strong support for the information content of dividend reductions. The percentage of dividend reduction is stronger for interim than for final dividend reductions. The market reaction is negatively related to the reduction in imputation tax credit and reacts more aggressively and negatively to interim as compared to final dividend reductions.

Suggested Citation

  • Balachandran, Balasingham & Krishnamurti, Chandrasekhar & Theobald, Michael & Vidanapathirana, Berty, 2012. "Dividend reductions, the timing of dividend payments and information content," Journal of Corporate Finance, Elsevier, vol. 18(5), pages 1232-1247.
    • Handle: RePEc:eee:corfin:v:18:y:2012:i:5:p:1232-1247
    DOI: 10.1016/j.jcorpfin.2012.08.002
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Scott Walker, 2015. "Repeated Dividend Increases: A Collection of Four Essays," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 17.
    2. repec:eee:glofin:v:34:y:2017:i:c:p:1-15 is not listed on IDEAS
    3. Warwick Anderson & Wen Kang, 2018. "The Relative Announcement Effects of Ordinary Dividends, Special Dividends and Share Buybacks in New Zealand," Working Papers in Economics 18/02, University of Canterbury, Department of Economics and Finance.
    4. Amin, Abu S. & Dutta, Shantanu & Saadi, Samir & Vora, Premal P., 2015. "Institutional shareholding and information content of dividend surprises: Re-examining the dynamics in dividend-reappearance era," Journal of Corporate Finance, Elsevier, vol. 31(C), pages 152-170.
    5. repec:eee:finmar:v:36:y:2017:i:c:p:40-55 is not listed on IDEAS

    More about this item

    Keywords

    Price reactions; Australia; Dividend reductions; Information content; Franked and unfranked; Interim and final;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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